EXHIBIT D-13
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT (the "Agreement") made as of this 7th day
of January, 2014 by and between Xxxxxx Associates Inc., a California corporation
with its principal place of business at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000-0000 (the "Adviser"), and X. Xxxx Price Associates,
Inc., a corporation with its principal place of business at 000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the "Sub-Adviser").
W I T N E S S E T H
WHEREAS, pursuant to authority granted to the Adviser by the Board of
Trustees (the "Board") of THE KP FUNDS (the "Trust") on behalf of the series
set forth on Schedule A to this Agreement (the "Fund") and pursuant to the
provisions of the Investment Advisory Agreement dated as of December 18, 2013
between the Adviser and the Fund (the "Management Agreement"), the Adviser has
selected the Sub-Adviser to act as sub-investment adviser of the Fund and to
provide certain related services, as more fully set forth below, and to perform
such services under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
set forth herein, the Adviser and the Sub-Adviser do hereby agree as follows:
1. APPOINTMENT.
(A) APPOINTMENT. Adviser hereby retains the Sub-Adviser to act as
investment adviser for and to manage the sub-adviser assets ("Assets")
defined below for the period and on the terms set forth in this Agreement.
The Sub-Adviser accepts such employment and agrees to render the services
herein set forth, for the compensation herein provided.
(B) ADDITIONAL FUNDS. In the event the Adviser designates one or more
funds other than the Fund with respect to which the Adviser wishes to
retain the Sub-Adviser to render investment advisory services hereunder, it
shall notify the Sub-Adviser in writing. If the Sub-Adviser is willing to
render such services, it shall notify the Adviser in writing, whereupon
such fund shall become a Fund hereunder, and be subject to this Agreement,
all subject to the approval of the Board of Trustees.
2. THE SUB-ADVISER'S SERVICES.
(a) DISCRETIONARY INVESTMENT MANAGEMENT SERVICES. The Sub-Adviser
shall act as sub-investment adviser with respect to the Fund. In such
capacity, the Sub-Adviser shall, subject to the supervision of the Adviser
and the Board, regularly provide the Fund with investment research, advice
and supervision and shall furnish continuously an
1
investment program for such Fund assets as may be allocated by the Adviser
to the Sub-Adviser, consistent with the investment objectives and policies
of the Fund and any investment guidelines established and modified from
time to time by the Adviser and communicated in writing to the Sub-Adviser.
The Sub-Adviser shall determine, from time to time, what investments shall
be purchased for the Fund and what securities shall be held or sold by the
Fund, subject always to the provisions of the Trust's Agreement and
Declaration of Trust, By-Laws and its registration statement on Form N-1A
(the "Registration Statement") under the Investment Company Act of 1940, as
amended (the "1940 Act"), and under the Securities Act of 1933, as amended
(the "1933 Act"), covering Fund shares, as filed with the Securities and
Exchange Commission (the "Commission"), and to the investment objectives,
policies and restrictions of the Fund, as each of the same shall be from
time to time in effect, and to any investment guidelines established by the
Adviser as referred to above. To carry out such obligations, the
Sub-Adviser shall without prior consultation with the Adviser exercise full
discretion and act for the Fund in the same manner and with the same force
and effect as the Fund itself might or could do with respect to purchases,
sales or other transactions, as well as with respect to all other such
things necessary or incidental to the furtherance or conduct of such
purchases, sales or other transactions. Notwithstanding the foregoing, the
Sub-Adviser shall, upon written instructions from the Adviser, effect such
portfolio transactions for the Fund as the Adviser may from time to time
direct; provided however, that the Sub-Adviser shall not be responsible for
any such portfolio transactions effected upon written instructions from the
Adviser. No reference in this Agreement to the Sub-Adviser having full
discretionary authority over the Fund's investments shall in any way limit
the right of the Adviser, in its sole discretion, to establish or revise
policies in connection with the management of the Fund's assets or to
otherwise exercise its right to control the overall management of the
Fund's assets.
(b) COMPLIANCE. The Sub-Adviser agrees to comply with the requirements
of the 1940 Act, the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), Commodity Exchange Act, only with respect to the
language in section 16(e)(i) of this Agreement, and the respective rules
and regulations thereunder, as applicable, as well as with all other
applicable federal and state laws, rules, regulations and case law that
relate to the services and relationships described hereunder and to the
conduct of its business as a registered investment adviser. The Sub-Adviser
also agrees to comply with the objectives, policies and restrictions set
forth in the Registration Statement, as amended or supplemented, of the
Fund, and with any policies, guidelines, instructions and applicable
procedures approved by the Board or the Adviser and provided to the
Sub-Adviser. In selecting the Fund's portfolio securities and performing
the Sub-Adviser's obligations hereunder, the Sub-Adviser shall cause the
Fund to comply with the diversification requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification
as a regulated investment company to the extent described in the
Subadviser's Subadvisory Services Document. The Sub-Adviser shall maintain
compliance procedures that it reasonably believes are adequate to ensure
the compliance with the foregoing.
2
(c) Foreign Currency Transactions. The Sub-Adviser is not required to
execute foreign currency trades through the custodian but may, in its sole
discretion and in accordance with its fiduciary duty, select the custodian
or counterparties for the execution of foreign currency transactions.
(d) PROXY VOTING. Pursuant to Board authority, the Adviser has the
authority to determine how proxies with respect to securities that are held
by the Fund shall be voted, and the Adviser may delegate the authority and
responsibility to vote proxies for the Fund's securities to the
Sub-Adviser. So long as proxy voting authority for the Fund has been
delegated to the Sub-Adviser, the Adviser shall provide such assistance to
the Sub-Adviser with respect to the voting of proxies for the Fund as the
Sub-Adviser may from time to time reasonably request, and the Adviser shall
promptly forward to the Sub-Adviser any information or documents necessary
for the Sub-Adviser to exercise its proxy voting responsibilities. The
Sub-Adviser shall carry out such responsibility in accordance with
Sub-Adviser's proxy voting policies and procedures any instructions that
the Board or the Adviser shall provide from time to time, and at all times
in a manner consistent with Rule 206(4)-6 under the Advisers Act and its
fiduciary responsibilities to the Trust. The Sub-Adviser shall provide the
Adviser with a copy of its written proxy voting policies and procedures and
as such may be amended from time to time. The Sub-Adviser shall provide
periodic reports and keep such records relating to proxy voting as the
Adviser and the Board may reasonably request or as may be necessary for the
Fund to comply with the 1940 Act and other applicable law. Any such
delegation of proxy voting responsibility to the Sub-Adviser may be revoked
or modified by the Board or the Adviser at any time.
Unless and until otherwise directed by the Adviser or the Board the
Sub-Adviser shall be responsible for voting the Fund's proxies and
exercising all other applicable rights of the Fund as a security holder in
connection with corporate actions or other transactions relating to the
Fund's portfolio holdings. The Sub-Adviser is authorized to instruct the
Fund's custodian and/or broker(s) to forward promptly to the Sub-Adviser or
designated service provider copies of all proxies and shareholder
communications relating to securities held in the portfolio of a Fund
(other than materials relating to legal proceedings against the Fund). The
Sub-Adviser may also instruct the Fund's custodian and/or broker(s) to
provide reports of holdings in the portfolio of the Fund. The Sub-Adviser
has the authority to engage a service provider to assist with
administrative functions related to voting Fund proxies. The Trust shall
direct the Fund's custodian and/or broker(s) to provide any assistance
requested by the Sub-Adviser in facilitating the use of a service provider.
In no event shall the Sub-Adviser have any responsibility to vote proxies
that are not received on a timely basis. The Trust acknowledges that the
Sub-Adviser, consistent with the Sub-Adviser's written proxy voting
policies and procedures, may refrain from voting a proxy if, in the
Sub-Adviser's discretion, refraining from voting would be in the best
interests of the Fund and its shareholders.
(e) RECORDKEEPING. The Sub-Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the
Fund, except as otherwise provided herein or as may be necessary for the
Sub-Adviser to supply to the
3
Adviser, the Trust or its Board the information required to be supplied
under this Agreement.
The Sub-Adviser shall maintain separate books and detailed records of
all matters pertaining to the Fund's assets advised by the Sub-Adviser
required by Rule 31a-1 under the 1940 Act (other than those records being
maintained by the Adviser, or any administrator custodian or transfer agent
appointed by the Fund) relating to its responsibilities provided hereunder
with respect to the Fund, and shall preserve such records for the periods
and in a manner prescribed therefore by Rule 31a-2 under the 1940 Act (the
"Fund Books and Records"). The Fund Books and Records shall be available to
the Adviser and the Board at any time upon request, shall be delivered to
the Trust, in a form agreed upon by the Adviser and the Sub-Adviser, which
may include an electronic format, upon the termination of this Agreement
and shall be available without delay during any day the Sub-Adviser is open
for business upon the Fund's or the Adviser's reasonable request.
(f) HOLDINGS INFORMATION AND PRICING. The Sub-Adviser shall provide
regular reports regarding the Fund's holdings, and may, on its own
initiative, furnish the Adviser, the Trust and its Board from time to time
with whatever information the Sub-Adviser believes is appropriate for this
purpose. The Sub-Adviser agrees to notify the Adviser and the Board
promptly if the Sub-Adviser reasonably believes that the value of any
security held by a Fund may not reflect fair value. The Sub-Adviser agrees
to provide upon request any pricing information of which the Sub-Adviser is
aware to the Adviser, Trust, its Board and/or any Fund pricing agent to
assist in the determination of the fair value of any Fund holdings for
which market quotations are not readily available or as otherwise required
in accordance with the 1940 Act or the Fund valuation procedures for the
purpose of calculating the Trust's net asset value in accordance with
procedures and methods established by the Board.
(g) COOPERATION WITH AGENTS OF THE ADVISER AND THE TRUST. The
Sub-Adviser agrees to cooperate with and provide reasonable assistance to
the Adviser, the Trust and any Trust custodian or foreign sub-custodians,
any Trust pricing agents and all other agents and representatives of the
Adviser and the Trust with respect to such information regarding the Fund
as such entities may reasonably request from time to time in the
performance of their obligations, provide prompt responses to reasonable
requests made by such persons and establish appropriate interfaces with
each so as to promote the efficient exchange of information and compliance
with applicable laws and regulations. The Sub-Adviser shall make its
officers and employees available to the Adviser from time to time to review
any current or proposed investment guidelines for the Fund and to consult
with the Adviser with respect to the Fund's investment matters.
(h) CONSULTATION WITH OTHER SUB-ADVISERS. In performance of its duties
and obligations under this Agreement, the Sub-Adviser shall not consult
with any other sub-adviser to the Fund or a sub-adviser to a portfolio that
is under common control with the Fund concerning transactions for the Fund,
except as permitted by the policies and
4
procedures of the Fund. The Sub-Adviser shall not provide investment advice
to any assets of the Fund other than the assets managed by the Sub-Adviser.
(i) Pay to Play. The Adviser represents that Shares of the Fund are
currently offered as underlying investments of asset allocation portfolios
(collectively, "Current Investors"). The Adviser agrees that should the
Fund be offered in the future to investors other than the Current
Investors, the Adviser shall provide the Sub-Adviser, in a manner and with
such frequency as is mutually agreed upon by the parties, with a list of
(i) each "government entity" (as defined by Rule 206(4)-5 under the
Investment Advisers Act of 1940, as amended ("Advisers Act")), invested in
the Fund where the account of such government entity can reasonably be
identified as being held in the name of or for the benefit of such
government entity on the records of the Fund; and (ii) each government
entity that sponsors or establishes a 529 Plan and has selected the Fund as
an option to be offered by such 529 Plan.
(j) Initial Public Offering (IPO). Sub-Adviser maintains procedures
which allow for the Assets to participate as a buyer in underwritten public
offerings in which entities affiliated with Sub-Adviser are selling shares.
Additionally, Sub-Adviser maintains procedures which allow for the Assets
to participate as a seller shareholder in underwritten public offerings in
which entities affiliated with Sub-Adviser are buying shares. Sub-Adviser
agrees to provide copies of any amendments to such procedures as soon as
practicable after such procedures have been amended. Sub-Adviser will
report to Adviser quarterly all purchases and sales that were effected
pursuant to such procedure during the preceding quarter.
3. CODE OF ETHICS. The Sub-Adviser has adopted a written code of ethics
that it reasonably believes complies with the requirements of Rule 17j-1 under
the 1940 Act, which it has provided to the Adviser and the Trust. The
Sub-Adviser shall ensure that its Access Persons (as defined in the
Sub-Adviser's Code of Ethics) comply in all material respects with the
Sub-Adviser's Code of Ethics, as in effect from time to time. Upon request, the
Sub-Adviser shall provide the Trust with (i) a copy of the Sub-Adviser's current
Code of Ethics, as in effect from time to time, and (ii) a certification that it
has adopted procedures reasonably necessary to prevent Access Persons from
engaging in any conduct prohibited by the Sub-Adviser's Code of Ethics.
Annually, the Sub-Adviser shall furnish a written report, which complies with
the requirements of Rule 17j-1, concerning the Sub-Adviser's Code of Ethics to
the Adviser and the Trust's Board. The Sub-Adviser shall respond to reasonable
requests for information from the Adviser and the Trust as to violations of the
Code by Access Persons and the sanctions imposed by the Sub-Adviser. The
Sub-Adviser shall notify the Adviser and the Trust as soon as reasonably
practicable of any material violation of the Code, whether or not such violation
relates to a security held by any Fund.
4. INFORMATION AND REPORTING. The Sub-Adviser shall provide the Adviser,
the Trust, and their respective officers with such periodic reports concerning
the obligations
5
the Sub-Adviser has assumed under this Agreement as the Adviser and the Trust
may from time to time reasonably request. Notwithstanding the foregoing
statement, the Sub-Adviser and the Adviser acknowledge that the Sub-Adviser is
not the compliance agent for the Fund, and does not have access to all of the
Fund's books and records. To the extent that the Sub-Adviser has agreed to
perform the services specified in this Agreement in accordance with applicable
law including the Code, the 1940 Act and the Advisers Act ("Applicable Law"))
and in accordance with the Trust Documents, policies and determination of the
Board of the Trust and the Advisers and the Trust's Prospectus, the Sub-Adviser
shall perform such services based upon its books and records with respect to the
Assets based upon information in its possession, which comprise a portion of the
Fund's books and records, and upon written instructions received from the Fund,
Adviser or the Fund's administrator, and shall not be held responsible under
this Agreement so long as it performs such services in accordance with this
Agreement, the Prospectus and Applicable Law based upon such books and records
and such instructions provided by the Trust, Adviser or the Trust's
administrator. The Sub-Adviser shall be afforded a reasonable amount of time to
implement any such instructions.
(a) NOTIFICATION OF BREACH OR SIGNIFICANT CHANGES / COMPLIANCE
REPORTS. The Sub-Adviser shall notify the Trust's Chief Compliance Officer
and Adviser as soon as reasonably practicable upon detection of (i) any
material failure to manage any Fund in accordance with its investment
objectives and policies or any applicable law; or (ii) any material breach
of any of the Fund's or the Adviser's policies, guidelines or procedures
that directly relate to the management of the Fund or the subadvisory
services that the Sub-Adviser provides to the Fund. To the best of its
knowledge, the Sub-Advisor shall provide the Advisor information of a
material breach of firm-wide compliance policies on a quarterly basis. The
Sub-Adviser shall notify the Adviser as soon as practicable of (i) any
significant changes in its investment strategy, asset allocation or other
matters affecting its management of the Fund's assets; or (ii) any changes
to the senior investment management personnel primarily responsible for the
investment or servicing of the Fund's assets which include portfolio
managers and relationship managers. In addition, the Sub-Adviser shall
provide a quarterly report regarding the Fund's compliance with its
investment objectives and policies, applicable law, including, but not
limited to the 1940 Act and Subchapter M of the Code, and the Fund's and
the Adviser's policies, guidelines or procedures as applicable to the
Sub-Adviser's obligations under this Agreement. The Sub-Adviser
acknowledges and agrees that the Adviser may, in its discretion, provide
such quarterly compliance certifications to the Board. The Sub-Adviser
agrees to correct any such failure promptly and to take any action that the
Board and/or the Adviser may reasonably request in connection with any such
breach as such may be agreed upon among all the parties including the
Sub-Adviser. Upon request, the Sub-Adviser shall also provide the officers
of the Trust with supporting certifications in connection with such
certifications of Fund financial statements and disclosure controls
pursuant to the Xxxxxxxx-Xxxxx Act. The Sub-Adviser will promptly notify
the Trust in the event (i) the Sub-Adviser is served or otherwise receives
notice of any action, suit,
6
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board, or body, involving the affairs of the Fund (excluding
class action suits in which a Fund is a member of the plaintiff class by
reason of the Fund's ownership of shares in the defendant) or the
compliance by the Sub-Adviser with the federal or state securities laws to
the extent that the action would materially adversely impact the
Sub-Advisor's ability to service the Fund or (ii) an actual change in
control of the Sub-Adviser resulting in an "assignment" (as defined in the
1940 Act) has occurred or is otherwise proposed to occur.
(b) INSPECTION. Upon reasonable request, the Sub-Adviser agrees to
make its records and premises (including the availability of the
Sub-Adviser's employees for interviews) to the extent that they relate to
the conduct of services provided to the Fund or the Sub-Adviser's conduct
of its business as an investment adviser, reasonably available for
compliance audits by the Adviser or the Trust's officers, employees,
accountants or counsel; in this regard, the Trust and the Adviser
acknowledge that the Sub-Adviser shall have no obligation to make available
proprietary information unrelated to the services provided to the Fund or
any information related to other clients of the Sub-Adviser. Should it be
necessary for the Adviser to confirm the absence or existence of any
conflict of interest or the compliance with any law, rule or regulation in
the management of the Fund or the ability of the Sub-Adviser to provide sub
advisory services to the Fund, to the extent that such inquiry involves
proprietary information relating to other clients of the Sub-Adviser, the
Sub-Adviser agrees to work with the Adviser to provide such information,
absent any proprietary information on any client, to reasonably enable the
Adviser to confirm the absence or existence of the foregoing.
(c) BOARD AND FILINGS INFORMATION. The Sub-Adviser will also provide
the Adviser and Trust with any information reasonably requested regarding
its management of the Fund required for any meeting of the Board, or for
any shareholder report, Form N-CSR, Form N-Q, Form N-PX, Form N-SAR,
amended registration statement, proxy statement, or prospectus supplement
to be filed by the Trust with the Commission. The Sub-Adviser will make its
officers and employees available to meet with the Board from time to time
on due notice to review its investment management services to the Fund in
light of current and prospective economic and market conditions and shall
furnish to the Board such information as may reasonably be necessary in
order for the Board to evaluate this Agreement or any proposed amendments
thereto.
(d) TRANSACTION INFORMATION. The Sub-Adviser shall furnish to the
Adviser and the Trust such information concerning portfolio transactions as
may be necessary to enable the Adviser, Trust or their designated agents to
perform such compliance testing on the Fund and the Sub-Adviser's services
as the Adviser and the Trust may, in their sole discretion, determine to be
appropriate. The provision of such information by the Sub-Adviser to the
Adviser, Trust or their designated agents in no way relieves the
Sub-Adviser of its own responsibilities under this Agreement.
7
5. BROKERAGE.
(a) PRINCIPAL TRANSACTIONS. In connection with purchases or sales of
securities for the account of a Fund, neither the Sub-Adviser nor any of
its directors, officers or employees will act as a principal or agent or
receive any commission except as permitted by the 1940 Act.
(b) PLACEMENT OF ORDERS. The Sub-Adviser shall arrange for the placing
of all orders for the purchase and sale of securities for a Fund's account
with brokers or dealers selected by the Sub-Adviser. In the selection of
such brokers or dealers and the placing of such orders, subject to the
other provisions of this paragraph, the Sub-Adviser is directed at all
times to seek for a Fund the best execution available under the
circumstances, taking into account factors such as price, commissions, size
of order and type of transaction, difficulty of execution, reliability,
integrity, general execution and operating capabilities of competing broker
dealers; their experience in particular markets; and brokerage and research
services provided by them. It is expected that the Sub-Adviser will seek
competitive commission rates generally although it is understood that the
Sub-Adviser will not necessarily pay the lowest commission available on
each transaction. It is also understood that it may be desirable for the
Fund that the Sub-Adviser have access to brokerage and research services
provided by brokers who may execute brokerage transactions at a higher cost
to the Fund than may result when allocating brokerage to other brokers,
consistent with section 28(e) of the 1934 Act and any Commission staff
interpretations thereof. Therefore, the Sub-Adviser is authorized to place
orders for the purchase and sale of securities for the Fund with such
brokers if the Sub-Adviser determines, in good faith, that such amount of
commissions is reasonable in relation to the value of such brokerage or
research services provided in terms of a particular Fund transaction or the
Sub-Adviser's overall responsibilities to the Fund and its other clients,
and that the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long-term. This practice is
subject to review by the Adviser and the Board from time to time with
respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to the Sub-Adviser
in connection with its or its affiliates' services to other clients.
(c) The Sub-Adviser also is hereby authorized to instruct the Fund
custodian with respect to any collateral management activities in connection
with any derivatives transactions. The Adviser agrees to provide the Sub-Adviser
with tax information, governing documents, legal opinions and other information
or documentation concerning the Funds necessary to allow the Sub-Adviser to
trade any financial instrument under any trading agreements executed by the
Adviser.
(d) AGGREGATED TRANSACTIONS. On occasions when the Sub-Adviser deems
the purchase or sale of a security to be in the best interest of a Fund as
well as other clients of the Sub-Adviser, the Sub-Adviser may, but is not
required, to the extent permitted by applicable law and regulations,
aggregate the order for securities to be sold or purchased. In such event,
the Sub-Adviser will allocate securities or futures contracts so purchased
8
or sold, as well as the expenses incurred in the transaction, in the manner
the Sub-Adviser reasonably considers to be equitable and consistent with
its fiduciary obligations to a Fund and to such other clients under the
circumstances.
(e) AFFILIATED BROKERS. The Sub-Adviser or any of its affiliates may
act as broker in connection with the purchase or sale of securities or
other investments for a Fund, subject to: (a) the requirement that the
Sub-Adviser seek to obtain best execution and price within the policy
guidelines determined by the Board and set forth in a Fund's current
Registration Statement; (b) the provisions of the 1940 Act; (c) the
provisions of the Advisers Act; (d) the provisions of the 1934 Act; and (e)
other provisions of applicable law. These brokerage services are not within
the scope of the duties of the Sub-Adviser under this Agreement. Subject to
the requirements of applicable law and any procedures adopted by the Board,
the Sub-Adviser or its affiliates may receive brokerage commissions, fees
or other remuneration from a Fund for these services in addition to the
Sub-Adviser's fees for services under this Agreement.
6. CUSTODY. Sub-Adviser shall have no responsibility with respect to
maintaining custody of the Fund's assets. Nothing in this Agreement shall permit
the Sub-Adviser to take or receive physical possession of cash, securities or
other investments of a Fund. The Fund and/or the Adviser, as applicable, will
execute custodial and other agreements as may be necessary to open an account
with futures clearing brokers and, if necessary, International Swaps and
Derivatives Association, Inc. ("ISDA") agreements with an over-the-counter
foreign currency forward prime broker.
7. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser will bear its own
costs of providing services hereunder. Other than as herein specifically
indicated, the Sub-Adviser shall not be responsible for a Fund's or the
Adviser's expenses, including brokerage and other expenses incurred in placing
orders for the purchase and sale of securities and other investment instruments.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) PROPERLY REGISTERED. The Sub-Adviser is registered as an
investment adviser under the Advisers Act, and will remain so registered
for the duration of this Agreement. The Sub-Adviser is not prohibited by
the Advisers Act or the 1940 Act from performing the services contemplated
by this Agreement, and to the best knowledge of the Sub-Adviser, there is
no proceeding or investigation that is reasonably likely to result in the
Sub-Adviser being prohibited from performing the services contemplated by
this Agreement. The Sub-Adviser agrees to promptly notify the Trust of the
occurrence of any event that would disqualify the Sub-Adviser from serving
as an investment adviser to an investment company. The Sub-Adviser is in
compliance in all material respects with all applicable federal and state
law in connection with its investment management operations.
9
(b) ADV DISCLOSURE. The Sub-Adviser has provided the Trust with a copy
of Part I of its Form ADV as most recently filed with the Commission and
its Part II as most recently updated and will, promptly after filing any
amendment to its Form ADV with the Commission or updating its Part II,
furnish a copy of such amendments or updates to the Trust. The information
contained in the Sub-Adviser's Form ADV is accurate and complete in all
material respects and does not omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under
which they were made, not misleading.
(c) FUND DISCLOSURE DOCUMENTS. The Sub-Adviser has reviewed and will
in the future review the applicable portions of, the Registration
Statement, summary prospectus, prospectus, statement of additional
information, schedule of investments in the periodic reports to
shareholders, and other reports and schedules to be mutually agreed uopn by
the Adviser and Sub- Adviser, filed with the Commission (including any
amendment, supplement or sticker to any of the foregoing) and advertising
and sales material relating to the Fund (collectively the "Disclosure
Documents") and represents and warrants that such Disclosure Documents
contain or will contain no untrue statement of any material fact and do not
and will not omit any statement of material fact required to be stated
therein or necessary to make the statements therein not misleading.
(d) DOCUMENT DELIVERY. Adviser will furnish, to Sub-Adviser copies of
each of the following prior to the commencement of the Sub-Adviser's
services:
(i) Resolutions of the Board of Trustees authorizing the
appointment of Sub-Adviser and approving this Agreement;
(ii) The Trust's Notification and Registration on form N-8A
under the 1940 Act as filed with Securities and Exchange
Commission (the "SEC");
(iii) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended and under the 1940 Act as
filed with the SEC currently in effect and all amendments
thereto insofar as such Registration Statement and such
amendments relate to the Fund;
(iv) The Trust's Prospectus;
(v) A list of first tier affiliates and second tier affiliates
(i.e., affiliates of affiliates) of the Fund;
(vi) A list of restricted securities for each Fund (including
CUSIP, Sedol or other appropriate security identification;
and
(vii) Investment guidelines, if any, established by the Adviser.
The Adviser also agrees to promptly update the above referenced items in
order to ensure
10
their accuracy, completeness and/or effectiveness.
A. NOTIFICATIONS OF CHANGES. The Adviser agrees, on an ongoing
basis, to notify the Sub-Adviser in writing of each change in the
fundamental and non-fundamental investment policies and restrictions
of the Portfolio or of any changes or modifications to any investment
guidelines established by the Adviser, before such changes become
effective, and to provide to the Sub-Adviser as promptly as
practicable copies of all amendments and supplements to the
Registration Statement before filing with the Securities and Exchange
Commission ("SEC").
B. SUPPLEMENTAL INFORMATION. During the terms of this Agreement,
the Adviser will provide the Sub-Adviser for review, with copies, at
its principal office, of all prospectus and proxy statements that
include a reference to the Sub-Adviser or the Funds. The Adviser shall
not use any such materials until the Sub-Adviser has reviewed,
commented, and such comments have been addressed to its reasonable
satisfaction within 7 business days. If requested by the Adviser, with
respect to any such materials requiring urgent or expedited review,
the Sub-Adviser agrees to work with the Adviser to provide such review
within a timeframe of less than 7 business days.
(e) USE OF NAMES. The Sub-Adviser has the right to use the names "KP"
and "Xxxxxx" in connection with its services to the Trust and the Trust and
the Adviser have the right to use the name "X. Xxxx Price" in connection
with the management and operation of a Fund. The Sub-Adviser is not aware
of any threatened or existing actions, claims, litigation or proceedings
that would adversely affect or prejudice the rights of the Sub-Adviser or
the Trust to use the name "X. Xxxx Price."
During the term of this Agreement, the Adviser shall furnish to the
Sub-Adviser all prospectuses, proxy statements, reports to shareholders,
sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Sub-Adviser's
name and its services in any way, or its logo, at a reasonable time prior
to the use thereof, and the Adviser shall not use any such materials if the
Sub-Adviser reasonably objects in writing within 48 hours (or such other
time as may be mutually agreed) after receipt thereof. Materials which have
been previously approved or those that only refer to Sub-Adviser's name or
logo are not subject to such prior approval provided the Adviser shall
ensure that such materials are consistent with those which were previously
approved by the Sub-Adviser as referenced in the preceding sentence.
(f) INSURANCE. The Sub-Adviser maintains errors and omissions
insurance coverage in an appropriate amount and shall provide written
notice to the Trust of any material changes in its insurance policies or
insurance coverage; or if any material claims will be made on its insurance
policies that may affect its ability to provide sub-advisory services
11
to the Trust.. Furthermore, The Sub-Adviser shall, upon reasonable request,
provide the Trust with any information it may reasonably require concerning
the amount of or scope of such insurance.
(g) NO DETRIMENTAL AGREEMENT. The Sub-Adviser represents and warrants
that it has no arrangement or understanding with any party, other than the
Trust, that would influence the decision of the Sub-Adviser with respect to
its selection of securities for a Fund, and that all selections shall be
done in accordance with what is in the best interest of the Fund.
(h) CONFLICTS. The Sub-Adviser shall act honestly, in good faith and
in the best interests of the Trust including requiring any of its personnel
with knowledge of Fund activities to place the interest of the Fund first,
ahead of their own interests, in all personal trading scenarios that may
involve a conflict of interest with the Fund, consistent with its fiduciary
duties under applicable law.
(i) REPRESENTATIONS. The representations and warranties in this
Section 8 shall be deemed to be made on the date this Agreement is executed
and at the time of delivery of the quarterly compliance report required by
Section 4(a), whether or not specifically referenced in such report.
9. SUB-ADVISER'S COMPENSATION. The Adviser shall cause the Fund to pay the
Sub-Adviser, as compensation for the Sub-Adviser's services hereunder, a fee,
determined as described in Schedule A that is attached hereto and made a part
hereof. Such fee shall be computed daily and paid not less than monthly in
arrears by the Fund.
The Sub-Adviser will be compensated based on the portion of Fund
assets allocated to the Sub-Adviser by the Adviser. The method for determining
net assets of the Fund for purposes hereof shall be the same as the method for
determining net assets for purposes of establishing the offering and redemption
prices of Fund shares as described in the Fund's prospectus. In the event of
termination of this Agreement, the fee provided in this Section shall be
computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the
number of days elapsed in the current month as a percentage of the total number
of days in such month.
10. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Sub-Adviser is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund, the Trust or the Adviser in any way
or otherwise be deemed to be an agent of the Fund, the Trust or the Adviser. If
any occasion should arise in which the Sub-Adviser gives any advice to its
clients concerning the shares of a Fund, the Sub-Adviser will act solely as
investment counsel for such clients and not in any way on behalf of the Fund.
12
11. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, (i) in the event of its
assignment (as defined in section 2(a)(4) of the 0000 Xxx) or (ii) in the event
of the termination of the Management Agreement; provided that such termination
shall not relieve the Adviser or the Sub-Adviser of any liability incurred
hereunder.
This Agreement may not be added to or changed orally and may not be modified or
rescinded except by a writing signed by the parties hereto and in accordance
with the 1940 Act, when applicable.
12. DURATION AND TERMINATION.
This Agreement shall become effective as of the date executed and shall remain
in full force and effect continually thereafter, subject to renewal as provided
in Section 12(c) and unless terminated automatically as set forth in Section 11
hereof or until terminated as follows:
(a) The Trust may cause this Agreement to terminate either (i) by vote
of its Board or (ii) with respect to the Fund, upon the affirmative vote of
a majority of the outstanding voting securities of the Fund; or
(b) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the
Sub-Adviser; or
(c) The Sub-Adviser may at any time terminate this Agreement by not
more than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Adviser; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Trustees, including a
majority vote of such Trustees who are not interested persons of the Trust,
the Adviser or the Sub-Adviser, at a meeting called for the purpose of
voting on such approval; or (ii) the vote of a majority of the outstanding
voting securities of the Fund; provided, however, that if the continuance
of this Agreement is submitted to the shareholders of the Fund for their
approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Sub-Adviser may continue to serve
hereunder as to the Fund in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and
(e) Termination of this Agreement pursuant to this Section shall be
without payment of any penalty.
In the event of termination of this Agreement for any reason, the Sub-Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such
13
notice, cease all activity on behalf of the Fund and with respect to any of its
assets, except as expressly directed by the Adviser or as otherwise required by
any fiduciary duties of the Sub-Adviser under applicable law. In addition, the
Sub-Adviser shall deliver the Fund's Books and Records to the Adviser by such
means and in accordance with such schedule as agreed to by the Adviser and the
Sub-Adviser, which may include electronic means, and shall otherwise cooperate,
as reasonably directed by the Adviser, in the transition of portfolio asset
management to any successor of the Sub-Adviser, including the Adviser.
13. CERTAIN DEFINITIONS. FOR THE PURPOSES OF THIS AGREEMENT:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940
Act, subject, however, to such exemptions as may be granted by the
Commission under the 1940 Act or any interpretations of the Commission
staff.
(b) "Interested persons" and "Assignment" shall have their respective
meanings as set forth in the 1940 Act, subject, however, to such exemptions
as may be granted by the Commission under the 1940 Act or any
interpretations of the Commission staff.
14. LIABILITY OF THE SUB-ADVISER.
(a) The Sub-Adviser shall exercise reasonable care in rendering its
services described in this Agreement. Except as may otherwise be required
by the 1940 Act or the rules thereunder or other applicable law, the
Sub-Adviser shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund or the Adviser in connection with the
matters to which this Agreement relates, except a loss resulting from
Sub-Adviser's willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties hereunder or from reckless disregard
by it of its obligations and duties under this Agreement. The Sub-Adviser
shall have responsibility for the accuracy and completeness (and liability
for the lack thereof) of statements in the Fund's Disclosure Documents
applicable to the Sub-Adviser.
(b) The Sub-Adviser shall be liable to the Fund for any loss (which
may include transaction costs, if applicable) incurred by the Fund as a
result of a breach of the standard of care described in subparagraph (a)
relating to any investment made by the Sub-Adviser in contravention of: (i)
any investment policy, guideline or restriction set forth in the
Registration Statement or as approved by the Board from time to time and
provided to the Sub-Adviser; or (ii) applicable law, including but not
limited to the 1940 Act and the Code (with respect to the Fund's failure to
satisfy the diversification requirements of Subchapter M of the Code due to
the Sub-Adviser's failure to comply with section 2(b) of this Agreement)
(the investments described in this subsection (b) collectively are referred
to as "Improper Investments").
14
(c) The Sub-Adviser shall indemnify and hold harmless the Trust, each
affiliated person of the Trust within the meaning of Section 2(a)(3) of the
1940 Act, and each person who controls the Trust within the meaning of
Section 15 of the 1933 Act (any such person, an "Indemnified Party")
against any and all losses, claims, damages, expenses or liabilities
(including reasonable attorneys' fees) to which any such person may become
subject under the 1933 Act, the 1934 Act, the 1940 Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) a breach by the
Sub-Adviser of this Agreement or of the representations and warranties made
by the Sub-Adviser herein; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any Disclosure Document or the
omission or alleged omission from a Disclosure Document of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that such material misstatement or omission
related to information regarding the Sub-Adviser and its services under the
Agreement, and provided further, that Sub-Adviser was offered the
opportunity to review and provide comments on such Disclosure Document; or
(iii) the Sub-Adviser's performance or non-performance of its duties
hereunder resulting from a breach of its standard of care described in
subparagraph (a) provided, however, that nothing herein shall be deemed to
protect any Indemnified Party who is a Trustee or officer of the Trust
against any liability to the Trust or to its shareholders to which such
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office with the Trust.
(d) The Adviser shall indemnify and hold harmless the Sub-Adviser from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses) ("Losses"), arising,
from or in connection with this Agreement or the performance by the
Sub-Adviser of its duties hereunder; provided however that the Adviser will
not indemnify the Sub-Adviser for Losses resulting from the Sub-Adviser's
willful misfeasance, bad faith or gross negligence in the performance of
its duties or from the Sub-Adviser's reckless disregard of its obligations
and duties under this Agreement.
(e) The services of the Sub-Adviser to the Adviser with respect to the
Assets are not to be deemed to be exclusive, and the Sub-Adviser and its
affiliates shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that the directors, officers, and
employees of the Sub-Adviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors, trustees, or employees of any
other firm or corporation, including other investment companies. Adviser
acknowledges that Sub-Adviser or its affiliates may give advice and take
actions in the performance of its duties to clients which differ from the
advice, or the timing and nature of actions taken, with respect to other
clients' accounts (including the Assets) or employee
15
accounts which may invest in some of the same securities recommended to
advisory clients. In addition, advice provided by the Sub-Adviser may
differ from advice given by its affiliates.
15. CONFIDENTIALITY.
(a) Subject to the general supervision and oversight of the Adviser
and the Board of trustees of the Trust (the "Board"), the Sub-Adviser will
use no material, non- public information concerning portfolio companies
that may be in its possession or the possession of any of its affiliates,
nor will the Sub-Adviser seek to obtain any such information, in providing
investment advice or investment management services to the Fund.
(b) Each party agrees that it will treat confidentially all
information provided by any other party (the "Discloser") regarding the
Discloser's businesses and operations, including without limitation the
investment activities or holdings of the Portfolio or the Fund, and any
other non-public information provided by the Discloser, either verbally or
in writing, in connection with discussions, in-person or otherwise, related
to any aspect of the Discloser's business operations and personnel matters
or which pertains to matters that a reasonable person would expect to be
treated as proprietary or confidential ("Confidential Information"). All
Confidential Information provided by the Discloser shall be used only by
the other party hereto (the "Recipient") solely for the purposes of
rendering services pursuant to this Agreement or for monitoring the
investments made pursuant to this Agreement (the "Purpose"), and shall not
be disclosed to any third party, without the prior consent of the
Discloser, except as permitted herein. Recipient may disclose Confidential
Information to a limited number of employees, affiliates, attorneys,
accountants and other advisers of the Recipient (its "Representatives") on
a need-to-know basis and solely for the Purpose, provided its
Representatives are subject to this Agreement or have entered into a
written nondisclosure agreement with Recipient with terms substantially
similar to the provisions herein. Recipient shall take reasonable security
precautions, at least as great as the precautions it takes to protect its
own confidential information, to prevent Confidential Information from
being disclosed to third persons.
(c) Confidential Information shall not include an information that:
(i) is public when provided or thereafter becomes public though no wrongful
act of the Recipient; (ii) is demonstrably known to the Recipient prior to
execution of the Agreement;(iii) is independently developed by the
Recipient without the use of Confidential Information provided by Discloser
through no wrongful act of the Recipient in the ordinary course of business
outside of this Agreement; (iv) is generally employed by the industry at
the time that the Recipient learns of such information or knowledge; or (v)
has been rightfully and lawfully obtained by the Recipient from any third
party.
16
(d) Recipient may disclose Confidential Information if requested or
required pursuant to a valid order or request by a court or regulatory body
(including examinations by regulators, deposition, interrogatories,
requests for information or documents in legal proceedings, subpoenas,
civil investigative demand or similar process), provided Recipient makes
reasonable efforts to obtain assurances that confidential treatment will be
accorded to such Confidential Information. All Confidential Information
disclosed as required by law shall nonetheless continue to be deemed
Confidential Information by Recipient.
16. DUTIES OF THE ADVISER.
(a) The Adviser shall continue to have responsibility for all services
to be provided to the Fund pursuant to the Advisory Agreement other than
those delegated to the Sub-Adviser and shall oversee and review the
Sub-Adviser's performance of its duties under this Agreement.
(b) The Adviser agrees that neither the Trust, the Adviser, nor
affiliated persons of the Trust or the Adviser shall, except with the prior
written permission of the Sub-Adviser, give any information or make any
representations or statements in connection with the sale of shares of the
Fund concerning the Sub-Adviser or the Fund other than the information or
representations contained in the Registration Statement, Prospectus or
Statement of Additional Information for the Trust shares, as they may be
amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved in writing in advance by the Sub-Adviser.
(c) Provision of Certain Information by the Adviser. The Adviser will
promptly notify the Sub-Adviser: (1) in the event that the SEC has censured
the Adviser or the Trust, placed limitations upon either of their
activities, functions, or operations, suspended or revoked the Adviser's
registration as an investment adviser, or has commenced proceedings or an
investigation that would likely result in any of these actions and (2) upon
having a reasonable basis for believing that the Fund with respect to the
Assets has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Code.
(d) The Adviser and the Fund's service providers will have overall
responsibility to ensure that the Fund's existing liens, charges and asset
coverage are accounted for so that the Sub-Adviser is able to direct the
deposit of margin or collateral to the extent necessary to meet the margin
and collateral obligations of the Fund with respect to any investments made
pursuant to the Prospectus.
(e) Adviser acknowledges, represents and warrants that:
17
(i) CFTC. In the event the Fund engages in trading certain
derivative contracts subject to CFTC regulation, Adviser
represents that, with respect to the Funds: (a) pursuant to
Commodity Futures Trading Commission Rule 4.5 ("Rule 4.5"),
neither Adviser nor any other party is required to be registered
as a "commodity pool operator" under the Commodity Exchange Act;
(b) a notice of eligibility claiming exclusion from registration
has been filed in accordance with Rule 4.5; and (c) during the
term of this Agreement, Adviser will ensure that all requirements
necessary in order to claim an exclusion from registration under
Rule 4.5 are satisfied. Adviser represents that it is exempt from
registration as a commodity trading adviser or will notify
Sub-Adviser if Adviser determines to register with respect to the
Funds.
(ii) The Trust is a "qualified institutional buyer" ("QIB") as
defined in Rule 144A under the Securities Act of 1933, as
amended, and the Adviser will promptly notify the Sub-Adviser if
the Trust ceases to be a QIB.
17. ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
18. LIMITATION OF LIABILITY. The parties to this Agreement acknowledge and
agree that all litigation arising hereunder, whether direct or indirect, and of
any and every nature whatsoever shall be satisfied solely out of the assets of
the affected Fund and that no Trustee, officer or holder of shares of beneficial
interest of the Fund shall be personally liable for any of the foregoing
liabilities. The Trust's Certificate of Trust, as amended from time to time, is
on file in the Office of the Secretary of State of the Commonwealth of
Massachusetts. Such Certificate of Trust and the Trust's Agreement and
Declaration of Trust describe in detail the respective responsibilities and
limitations on liability of the Trustees, officers, and holders of shares of
beneficial interest.
19. CHANGE IN THE ADVISER'S OWNERSHIP. The Sub-Adviser agrees that it shall
notify the Trust of any anticipated or otherwise reasonably foreseeable change
in the ownership of the Sub-Adviser within a reasonable time prior to such
change being effected.
20. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Maryland and the
Sub-Adviser consents to the jurisdiction of courts, both state or federal, in
Maryland, with respect to any dispute under this Agreement.
21. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
18
22. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. NOTICES. All notices hereunder shall be given in writing (and shall be
deemed to have been duly given) by delivery in person, by facsimile or by
electronic means (with corresponding personal, facsimile or electronic receipt
of such delivery), or by registered or certified mail (with return receipt
requested), or by reputable overnight delivery service (with evidence of receipt
to the parties) at the address of each set forth below (or at such other
address, number or electronic address for a party as shall be specified by like
notice.
If to the Sub-Adviser:
X. Xxxx Price Associates, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Chief Legal Counsel
Facsimile: 410.345.6575
Email: xxxxx_xxxxxxxxxxx@xxxxxxxxxx.xxx
Telephone: 000.000.0000
If to the Adviser:
Xxxxxx Associates Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Vice President, Trust Advisory Group
Facsimile: 303.832.8230
Email: xxxx@xxxxxx.xxx
Telephone: 000.000.0000
19
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their duly authorized officers as of the date first above
written.
XXXXXX ASSOCIATES INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X. Xxxxx
Title: President & Director of Research
X. Xxxx Price Associates, Inc.
By:/s/ Xxxx Xxxxxxx Xxxx
------------------------
Name: Xxxx Xxxxxxx Xxxx
Title: Vice President
20
SCHEDULE A
to the
SUB-ADVISORY AGREEMENT
dated JANUARY 7, 2014 between
XXXXXX ASSOCIATES INC.
and
X. Xxxx Price Associates, Inc.
Each Fund will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee, computed daily at an annual rate based on the average
daily net assets of the portion of the Fund (or "Assets" as defined in this
Agreement) as may be allocated by the Adviser to the Sub-Adviser from time to
time under the following fee schedule:
FUND RATE
KP Large Cap Equity Fund - Active Large Cap [Redacted]%
Growth Sub-Strategy
